Resilient Media Entertainment

Thursday, February 16, 2012

A VTB Capital Private Equity portfolio company has become the first Russian firm to list on the New York Stock Exchange in eight years.

VTB Capital Private Equity and Special Situations - the private equity arm of the largest investment bank in Russia, VTB Capital - offered of 6,000,000 shares of common stock of IT services company EPAM Systems on the US exchange at a price of $12 per share.

The private equity firm reduced its stake from about 8% to roughly 5% as a result of the transaction, a source close to the matter said. EPAM’s largest shareholder is Russia Partners and other shareholders include the company’s management.

The initial public offering marks both the technology company's debut on the public markets and the first listing of a Russian company on the New York Stock exchange since Mechel joined in 2004.

Tim Demchenko, global head of private equity at VTB Capital PESS, said “There are not many Russian and CIS-based technology companies that have been internationally listed. But after the Yandex deal there is greater awareness from international investors about Russia as somewhere that does not just produce commodities and natural resource companies”

Netherlands-based Russian search engine operator Yandex listed on the Nasdaq in a $1.3bn deal last May.

Demchenko said that EPAM’s international presence made a US listing an "obvious choice" for the company. More than 85% of its sales are generated outside of Russia in developed markets, including continental Europe and the US.

“EPAM is a Belarussian company and has expanded into the major CIS countries such as Russia and the Ukraine and also the Nordic region, but it is headquartered in the US, as most of its clients are multinationals and that gives them more confidence in the business," he said.

While a number of Russian companies have been known to list in London, many on the AIM exchange, Demchenko said that would not have been appropriate for EPAM.

“Russian companies that list on the AIM index in the UK are more focused on natural resources,” he said. Lower liquidity levels on the AIM also influenced the final choice of exchange.

Demchenko added that a Moscow listing would also have been unsuitable for EPAM, claiming these are more appropriate for multi-billion dollar businesses than their smaller companies.

However, he added that there is a growing awareness of Russia’s growing technology sector. “Technology is taking off as an investment theme in Russia, the government is diversifying away from oil and gas and focusing more on modern technology, which is attracting more investment from Russian and international investors in the sector,” he said.